Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Saturday, October 22, 2011

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENIN’

Tons of BUZZ today!

BTW – I do
apologize for the inconsistency of the type in recent posts here at TWTP.For some reason Blogger.com seems to be a bit
FU-ed – and I have trouble when I “cut and paste” blog posts from Word to
Blogger.Can anyone provide any guidance
for how to fix, or avoid, the FUs?

“Are you in the top 25% of all earners? The top 10%? Plus, find out what
portion of the tax burden you bear according to your income status.”

The accompanying article “Where Do You Rank as a Taxpayer?” has a breakdown of income and taxes
paid by category which indicates that for 2009 the top 1% paid 37% of federal
income taxes collected, the top 50% paid 98%, and the bottom 50% paid 2%.

Constipation, Mr Holmes!So why
did you not start earlier in the year?And when are you going to start seriously working on the overhaul?I am tired of hearing every politician say we
must reform the Tax Code.Do something
about it!

“A 401(k) account held with your employer isn't a piggy bank you can
crack open and raid. While
some plans offer in-service withdrawals, it's not common. The 401(k) plan may
have loan provisions allowing you to borrow against the plan, but it isn't
required to have a plan loan option.”

While
some plans offer a loan option, this can result in tax problems if you
terminate your employment before paying off the loan.

Your 401(k)
account is “retirement savings”.You
should use it to save for retirement.It
should be the absolute last place you turn to for money, and only if you do
have a true emergency or hardship.

As a
related aside - depending on your emergency you may be able to avoid the
premature penalty on some of the withdrawal if you first transfer the money to
an IRA.

The
person posing the question says that he will use the money from reduced
mortgage payments to “rebuild” the 401K9K account.In response Dr Don makes a good point –

“I'm not a huge fan of people raiding their
retirement accounts with the promise they'll rebuild them with future savings.
Yes, you can make the math work, but you have to have the financial discipline
to actually replenish the savings. Do you truly have that discipline?”

“The American
Institute of CPAs convinced the Internal Revenue Service to require registered
tax return preparers under the new IRS’s regulatory program to add a special
disclaimer to any of their advertising to avoid the appearance of an IRS
endorsement.”

I am glad the AICPA is worried that the new RTRP
initials will help dispel the urban tax myth that a CPA = tax expert.

The
item did not quote the actual disclaimer.

Thanks,
Knobby!

+
I am constantly referencing lists here at the BUZZ that verify the high taxes
NJ residents are subject to.However
there is one list where NJ is at the bottom.

“He said he would unveil a proposal
next week calling for creation of a flat tax, which would replace the present
system of graduated tax rates based on income with a single rate for all
taxpayers regardless of income.

Perry told an audience of about 150
Republicans that his plan would also include a ban on congressional earmarks,
passage of a balanced budget amendment to the Constitution, spending cuts and
entitlement reform. He plans to unveil details in a speech Tuesday in South
Carolina.”

Perry
would shred "the current 3 million
words of the American tax code" and replace it with "something simple: a flat tax."

"I want to make the tax code so simple that
even (Treasury Secretary) Timothy
Geithner can file his taxes on time."

I am not against a flat tax, and look forward to
hearing more details next week (which I will report to you here).

“Lowers the
corporate tax rate to 15%, making America competitive in the global market.
Allows American companies to repatriate capital without additional taxation,
spurring trillions in new investment. Extends all Bush tax cuts. Abolishes the
Death Tax. Ends taxes on personal savings, allowing families to build a nest
egg.”

+ One would hope that most voters agree that
Michele Bachman is too crazy to be taken seriously.But if you don’t, here is what she has said
about her tax plan –

“And under my tax
plan I want to adopt the Reagan tax plan. It brought the economic miracle of
the 1980s. Why not go with what works? I want to reinstitute the Reagan tax
model from the 1980s.”

“As many as 2.1 million taxpayers
may have erroneously claimed a total of $3.2 billion by taking advantage of the
American Opportunity Tax Credit,
which provides up to $2,500 in relief for college students paying tuition and
related expenses. The tax credit, once known as the Hope Scholarship Credit,
was expanded as part of the 2009 economic stimulus program.”

“Are you afraid of Quicken?
Do you hate working on your computer? Is record keeping one of your least
favorite things to do? If you feel this way but still want to get every tax
deduction you possibly can qualify for, you’re not alone.”

Erin
provides “tips for getting the most out
of your small business tax returns without stressing yourself over software
programs and techie stuff”.

“Section 501 of the U.S.-Korea Free Trade
Agreement Implementation Act, HR 3080, increases the EITC due
diligence penalty from $100 to $500. The Sec. 6695(g) penalty applies to each
failure of a tax return preparer to exercise due diligence in determining
taxpayer eligibility for, or the amount of, anEITC.”

And –

“Section 502 of the Korea trade act adds (as
new Sec. 6116) a requirement that the Federal Bureau of Prisons and state
prison administrative agencies annually send the IRS a list of all inmates
incarcerated in the prison system at any time during the previous two calendar
years and the first eight months of the current year.”

There
would be no need for assessing an EITC due diligence penalty if the EITC was
taken out of the Tax Code and the benefit was provided as a direct payment by
the appropriate federal or state social service agencies!

+ While I
could not renew my PTIN online (as I discussed in my post “PTIN Update”) EA
Russ Fox was finally able to after much trouble and agita, as he explains in “PTIN Follies, Year 2” at TAXABLE TALK.

+
Submit a comment and help support breast cancer research in TAX GIRL Kelly
Phillips Erbs’ annual “Comment for the Cure” at FORBES.

2 comments:

Ok, my gut feeling is that with all this talk going on among the GOP Pres. candidates, that I have a bad feeling that somewhere come 3rd week in Dec our illustrious Con-Gress will screw with the tax code again and throw the 2012 tax season into chaos, AGAIN...

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